The world of private wealth is becoming increasingly intricate. Globalization, coupled with the heightened mobility of affluent individuals, has created a landscape where clients frequently possess residences and assets spanning multiple countries. This necessitates a sophisticated understanding of international estate, trust, and tax planning, a need underscored by the insights and expertise recognized by Chambers And Partners, a leading authority in legal rankings and analysis.
The Rising Complexity of International Private Wealth Management
Planning for wealth during life and its transfer after death has become significantly more challenging. The lingering global pandemic and ongoing international conflicts have created economic instability. Families are now navigating a web of often-conflicting tax laws, inheritance regulations, international treaties, and diverse cultural norms. In this complex environment, international private client lawyers must collaborate closely with legal experts across various jurisdictions. Isolated advice is no longer sufficient; a holistic approach is crucial to identify and address all factors impacting a client’s wealth planning. Chambers and Partners consistently highlights the importance of this international collaboration, recognizing firms adept at cross-border cooperation.
Bridging Cultural and Legal Divides: A Key Differentiator
Cultural understanding, encompassing both legal and national nuances, is paramount. Lawyers who excel in this area are increasingly valuable assets, whether in non-contentious planning or complex trust and estate litigation. Efforts to bridge cultural and linguistic gaps minimize errors and foster smoother international operations. Legal teams that operate synergistically, respecting the intricacies of each legal system and appreciating the significance of language and culture, possess a considerable advantage. This collaborative and culturally sensitive approach, often recognized in Chambers and Partners rankings, is essential for successful cross-border work, moving beyond siloed, jurisdiction-specific practices. The Chambers Private Wealth Global Practice Guide itself is a testament to this need for cross-border cooperation, aiming to facilitate the very collaboration that Chambers and Partners emphasizes.
Several recent global legal trends are particularly relevant to families, their businesses, and wealth planning strategies.
Increased Global Mobility and Digitalization
Emerging from the COVID-19 pandemic, we observe a surge in digitalization and remote work opportunities, fostering unprecedented individual mobility. People are more transient than ever. The rise of electronic tools in international estate, trust, and tax planning is another significant shift. However, with private client data becoming increasingly accessible via digital platforms, robust cybersecurity measures are crucial to mitigate security vulnerabilities.
Global shifts in immigration and tax policies further fuel this mobility. Jurisdictions offering “residence-by-investment” schemes and preferential tax treatment for new residents are attracting significant interest. However, these policies have also faced criticism. The European Commission, for example, has urged member states to eliminate residence-by-investment programs due to concerns about money laundering and security risks. Commentators have also questioned the broader impact of these policies on local communities.
Consequently, some countries are re-evaluating or terminating these programs. Portugal significantly amended its Golden Visa program in late 2023, removing real estate investment as a residency pathway. Greece increased investment threshold requirements in early 2024, and Spain recently announced plans to phase out its Golden Visa program. The UK has also seen major changes to its “non-dom” tax regime, with further reforms expected. These evolving policies, tracked and analyzed by organizations like Chambers and Partners, will remain a critical area of focus in cross-border client practice.
Global Conflicts and Economic Sanctions
Russia’s invasion of Ukraine in 2022 triggered a devastating humanitarian crisis and led to widespread economic sanctions from the EU, the USA, and other nations, creating significant global economic repercussions.
These sanctions have profoundly impacted private client advisors, who must stay informed about evolving guidelines regarding clients with Russian connections. Sanctions violations often carry strict liability and severe penalties. Chambers and Partners acknowledges the expertise required to navigate these complex and shifting sanctions regimes, recognizing lawyers who demonstrate proficiency in this area.
The escalation of the conflict in the Middle East following the October 2023 Hamas attack on Israel has further destabilized the global landscape. This conflict has resulted in immense human suffering and widespread displacement, creating a humanitarian crisis in Gaza.
The Middle East conflict has had global ramifications, sparking protests, boycotts, and calls for divestment and sanctions worldwide. Private client advisors must vigilantly monitor the political and economic environment surrounding this conflict, anticipate potential sanctions, and understand the resulting shifts in global migration patterns impacting their clients. Chambers and Partners’ coverage of geopolitical risks and their legal implications is invaluable for professionals in this field.
2024 Elections and Heightened Political Risk
With a significant portion of the global population participating in elections in 2024, this year is politically momentous. Election outcomes are likely to trigger shifts in economic policies and tax laws, with lasting consequences for client planning.
The UK’s July 2024 general election saw a historic Labour Party victory. The US presidential election in November 2024 will determine the future political direction of the world’s largest economy.
Earlier editions of the Chambers Private Wealth Global Practice Guide have already highlighted increasing global political volatility, citing the resurgence of tariffs in international trade, rising nationalism, and the consolidation of authoritarian regimes. The pandemic’s socio-economic fallout, escalating international conflicts, and other societal pressures have amplified global political instability and, in some regions, civil unrest. The risk of nationalization is elevated, emphasizing the need for private clients to separate personal wealth from potentially vulnerable company assets – a challenge when family wealth is often closely tied to family businesses. Chambers and Partners’ analysis often underscores these evolving political risks and their implications for wealth management.
Private client advisors must remain alert to power shifts and policy changes to provide effective counsel amidst this political flux.
The Fragile Global Economy
The lingering effects of the pandemic and ongoing global conflicts, compounded by persistent inflation and high global interest rates, continue to fuel concerns about a potential recession. The results of the 2024 elections will undoubtedly further shape the global economic trajectory. These macroeconomic factors have substantial consequences for clients and their business interests. Chambers and Partners’ insights into the economic landscape and its legal ramifications are crucial for advisors navigating these uncertain times.
The Relentless Drive for Transparency and Oversight
The global push for transparency continues to reshape the international private client sector. Governments are increasingly scrutinizing cross-border arrangements and structures, implementing regulatory frameworks that mandate the exchange of tax-related information. The USA’s Foreign Account Tax Compliance Act (FATCA) has achieved near-universal international compliance.
The Common Reporting Standard (CRS), developed by the OECD for reciprocal automatic information exchange, has been adopted by over 100 jurisdictions. CRS requires entities, including trusts and foundations, to report information on controlling persons. For trusts, controlling persons encompass settlors, trustees, protectors (if any), beneficiaries, and any individuals exercising ultimate effective control.
Despite the fact that many of these individuals (often residing in multiple jurisdictions) may not actually control a trust, the broad reporting requirements create significant compliance burdens for trustees and financial institutions. The global reach of CRS necessitates enhanced cooperation among advisory teams across relevant jurisdictions. Chambers and Partners recognizes firms with strong international networks and expertise in navigating these complex reporting regimes.
Expanding Mandatory Disclosure Requirements
The European Union has expanded mandatory disclosure beyond CRS with DAC6, an EU Directive compelling tax, accounting, and legal professionals (“intermediaries”) to report qualifying cross-border planning arrangements. Disclosure is triggered by any cross-border arrangement exhibiting specified “hallmarks.” DAC6 implementation varies across jurisdictions and is retroactive to June 25, 2018, potentially creating substantial reporting obligations for intermediaries and clients.
Beyond automatic information exchange intended for tax and law enforcement authorities, some governments and organizations are advocating for even greater transparency through public registers. The fifth Anti-money Laundering Directive (5AMLD), adopted by the European Parliament and Council in July 2018, broadened access to EU member states’ national registers of ultimate beneficial ownership of trusts. Initially, beneficial ownership information was to be accessible to professionals subject to anti-money laundering rules, individuals demonstrating a “legitimate interest,” and the public (for trusts holding certain interests in non-EU companies).
However, in November 2022, the European Court of Justice invalidated this amendment, prioritizing the right to privacy under the European Union Charter. Beneficial ownership information is now restricted to those demonstrating a “legitimate interest,” potentially signaling a shift away from maximal transparency.
In May 2024, the Anti-Money Laundering Regulation and the sixth Anti-Money Laundering Directive were adopted, aiming to harmonize anti-money laundering rules and provide guidance on information to be held in EU beneficial ownership registers. Access is granted to those with a broadly defined “legitimate interest,” including authorities, journalists, and civil society organizations. Chambers and Partners closely monitors these regulatory developments and their impact on private wealth structures.
Prior to 5AMLD, the UK enacted similar legislation for corporate shareholders, requiring disclosure of persons with significant control. Since 2016, UK-incorporated companies and LLPs must maintain public registers of individuals with significant control. Since 2018, UK-resident trusts and trusts with UK assets or income must provide information for the UK trust register.
Responding to 5AMLD, the UK expanded its trust register to include additional categories of non-UK trusts with UK connections, requiring registration by September 2022. In line with EU regulations, the UK register, previously limited to government institutions, is now accessible to those with a “legitimate interest.”
The EU also exerts transparency pressure on offshore jurisdictions through a list of non-cooperative tax jurisdictions. In February 2024, the “blacklist” included 12 jurisdictions. Many offshore jurisdictions have adopted or plan to adopt local laws implementing DAC6 and 5AMLD provisions. Chambers and Partners provides analysis of these evolving transparency obligations and their implications for offshore financial centers.
These developments coincide with increasing risks for tax and compliance advisors. The UK Criminal Finances Act, the US Foreign Corrupt Practices Act, and similar laws threaten private client advisors with criminal penalties for client misconduct, effectively involving them in client oversight. Under the UK Criminal Finances Act, corporate bodies failing to prevent the facilitation of tax offenses or money laundering by employees face substantial penalties.
In the USA, new reporting requirements under the Corporate Transparency Act (part of the Anti-Money Laundering Act of 2020) took effect in January 2024. Corporations, LLCs, and similar entities must disclose beneficial ownership information to FinCEN. A beneficial owner includes individuals exercising substantial control or owning at least 25% of a reporting company. While not publicly accessible, this information is available to law enforcement, regulatory agencies, financial institutions (in certain cases), and Treasury personnel. Chambers and Partners recognizes the growing compliance burden and risks faced by advisors in this heightened transparency environment.
The substantial reporting burdens imposed by these regulations are significantly impacting the offshore trust sector. Smaller trust companies often lack the resources for complex compliance, and the risks of incorrect reporting may outweigh the benefits of serving clients from certain jurisdictions.
Some commentators question the privacy implications and the efficacy and fairness of these expansive transparency frameworks. Practitioners are increasingly challenging the public accessibility of court proceedings related to trust administration or intra-family matters, particularly in non-contentious cases. They argue that public transparency may unduly infringe on litigants’ privacy. This trend might drive trust administration business towards offshore forums with greater privacy protections, a development monitored by Chambers and Partners in its global legal market analysis.
The Surge in Estate and Trust Litigation
The world is undergoing the largest intergenerational wealth transfer in history, leading to an unprecedented rise in cross-border estate and trust litigation. Trustees are increasingly involved in complex and costly international disputes, often targeted by beneficiaries or excluded family members in jurisdictions with forced inheritance laws or non-recognition of trusts. Potential global recession may further escalate such disputes as trustees grapple with distribution decisions and investment strategies in volatile markets. Litigation related to bankruptcy and fraud may also increase. Chambers and Partners acknowledges the growing prominence of estate and trust litigation and ranks leading firms in this specialized area.
The issue of testamentary capacity is a growing concern. Lawyers are increasingly prioritizing documentation of clients’ capacity at the time of will and trust execution and emphasizing planning for future incapacity through powers of attorney and succession planning. Chambers and Partners recognizes lawyers with expertise in both contentious and non-contentious trust and estate matters.
Proactive litigation anticipation is crucial for achieving favorable outcomes, whether through court rulings or negotiated settlements. The clash of laws and procedures in different jurisdictions presents both risks and opportunities in multi-jurisdictional trust litigation. Litigation teams with deep understanding of jurisdictional intricacies and cultural nuances can leverage these discrepancies to their advantage. Chambers and Partners rankings highlight firms with demonstrated success in navigating complex cross-border litigation.
The Advent of Artificial Intelligence (AI)
Rapid AI advancements have dominated headlines, transforming work and life. However, concerns persist about the potential harms of such rapid technological progress.
AI raises significant questions within the legal sector. Many lawyers and firms are adopting AI in their practices. However, the extent to which AI can replicate core legal professional skills remains debated. While AI may assist lawyers, skills like emotional intelligence and client relationship management may prove irreplaceable. The integration of AI into legal practice also raises ethical considerations regarding lawyers’ responsibilities to clients when utilizing AI assistance. Chambers and Partners acknowledges the increasing importance of technology and innovation in the legal profession, including the responsible adoption of AI.
Looking Ahead: Navigating Uncertainty and Emerging Challenges
We are living in an era of heightened uncertainty, grappling with economic volatility, international conflicts, and the enduring impact of a global health crisis. These uncertainties will shape the trends discussed – transparency, estate and trust litigation, and political volatility. However, private client advice extends beyond these areas. A significant portion of the work involves facilitating responsible and lasting wealth succession, preserving family businesses, fostering family harmony, safeguarding family assets for present and future generations, and protecting private property rights. These enduring needs will persist and grow.
Emerging challenges include adapting laws and structures to evolving reproductive technologies, from surrogacy to posthumous reproduction. Legal frameworks addressing inheritance rights and definitions of terms like “issue” and “legitimate” in these contexts are often lacking or inconsistent across jurisdictions.
Digital assets, including cryptocurrencies, represent another frontier for legal systems to address. Developing legal frameworks for these new challenges, particularly after crypto market volatility and amidst potential economic recession, will be increasingly important. Chambers and Partners continues to provide invaluable insights and rankings that help individuals and families navigate this complex and ever-evolving landscape of global private wealth.
